M&A Bankers on Yahoo-Microsoft: Done Deal

We canvassed a couple of Wall Street M&A moguls last night for their thoughts on how the Microsoft-Yahoo (MSFT/YHOO) deal would play out. Their thoughts:

It's a done deal.

Jerry's language in his "letter to shareholders" was a bold move. The use of the word "subtantially"--as in "Microsoft's bid "substantially undervalues" Yahoo--will expose the board to lawsuits if the deal gets done at, say, $32-$33. Yahoo's lawyers must be peeing in their pants about this, especially since the value of Microsoft's offer has since dropped

Microsoft will give Yahoo a couple of weeks to "have its talks" with others. These talks won't lead anywhere, and both sides know it.

Microsoft will gradually ramp up the proxy fight rhetoric. Meanwhile, Yahoo's board will begin to get more and more pressure from Yahoo's big institutional shareholders to initiate talks.

At some point soon, Yahoo's lead banker, Goldman Sachs, will call Microsoft's lead banker, Morgan Stanley, and talks will begin.

At the 11th hour, Microsoft will offer a price concession--but only at the 11th hour.

The price concession will not necessarily raise the value of the offer above $31 per share, the original value (It's currently $28.80). Microsoft will argue that its stock is down with the market and that, but for Microsoft's offer, Yahoo's stock would be down, too. (This will be b.s.--MSFT is down more than the S&P500--but perhaps Microsoft's bankers will find some tech index to compare MSFT's stock to).